IDEAS home Printed from https://ideas.repec.org/a/bla/deveco/v52y2014i4p301-321.html
   My bibliography  Save this article

Dropouts, Defaulters, and Continuing Borrowers: Client Exit from Microfinance

Author

Listed:
  • Sarah Pearlman

Abstract

type="main"> High dropout rates are a problem faced by many microfinance institutions, with borrowers exiting after a few loans. The curiosity of dropouts is that, unlike defaulters, they repay their loans. To understand this I investigate differences across borrowers using data from Zimbabwe. I find that negative shocks are a significant predictor of dropout, but not of default, and that social networks are the most important correlate of on-time repayment. The results show the importance of social networks in determining credit relationships.

Suggested Citation

  • Sarah Pearlman, 2014. "Dropouts, Defaulters, and Continuing Borrowers: Client Exit from Microfinance," The Developing Economies, Institute of Developing Economies, vol. 52(4), pages 301-321, December.
    • Handle: RePEc:bla:deveco:v:52:y:2014:i:4:p:301-321
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1111/deve.12055
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Richard L. Meyer, 2002. "The demand for flexible microfinance products: lessons from Bangladesh," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(3), pages 351-368.
    2. Okten, Cagla & Osili, Una Okonkwo, 2004. "Social Networks and Credit Access in Indonesia," World Development, Elsevier, vol. 32(7), pages 1225-1246, July.
    3. DeanS. Karlan, 2007. "Social connections and group banking," Economic Journal, Royal Economic Society, vol. 117(517), pages 52-84, February.
    4. Tassel, Eric Van, 2004. "Household bargaining and microfinance," Journal of Development Economics, Elsevier, vol. 74(2), pages 449-468, August.
    5. Wydick, Bruce & Karp Hayes, Harmony & Hilliker Kempf, Sarah, 2011. "Social Networks, Neighborhood Effects, and Credit Access: Evidence from Rural Guatemala," World Development, Elsevier, vol. 39(6), pages 974-982, June.
    6. Takashi Kurosaki & Hidayat Ullah Khan, 2012. "Vulnerability Of Microfinance To Strategic Default And Covariate Shocks: Evidence From Pakistan," The Developing Economies, Institute of Developing Economies, vol. 50(2), pages 81-115, June.
    7. Sonia LASZLO & Eric SANTOR, 2009. "Migration, Social Networks, And Credit: Empirical Evidence From Peru," The Developing Economies, Institute of Developing Economies, vol. 47(4), pages 383-409, December.
    8. Monique Cohen, 2002. "Making microfinance more client-led," Journal of International Development, John Wiley & Sons, Ltd., vol. 14(3), pages 335-350.
    9. Alessandra Cassar & Bruce Wydick, 2010. "Does social capital matter? Evidence from a five-country group lending experiment," Oxford Economic Papers, Oxford University Press, vol. 62(4), pages 715-739, October.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Mathilde Bauwin & Walid Jbili, 2017. "Loyalty, trust, and glass ceiling: The gender effect on microcredit renewal," WIDER Working Paper Series 101, World Institute for Development Economic Research (UNU-WIDER).
    2. Md Aslam Mia & Hasanul Banna & Abu Hanifa Md Noman & Md Rabiul Alam & Md. Sohel Rana, 2022. "Factors affecting borrowers’ turnover in microfinance institutions: A panel evidence," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(1), pages 55-84, March.
    3. Mathilde Bauwin & Walid Jbili, 2017. "Loyalty, trust, and glass ceiling: The gender effect on microcredit renewal," WIDER Working Paper Series wp-2017-101, World Institute for Development Economic Research (UNU-WIDER).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. de Quidt, Jonathan & Fetzer, Thiemo & Ghatak, Maitreesh, 2018. "Commercialization and the decline of joint liability microcredit," Journal of Development Economics, Elsevier, vol. 134(C), pages 209-225.
    2. Luminita Postelnicu & Niels Hermes, 2018. "Microfinance Performance and Social Capital: A Cross-Country Analysis," Journal of Business Ethics, Springer, vol. 153(2), pages 427-445, December.
    3. Wonhyung Lee & Nurul Widyaningrum, 2019. "Multidimensional access to financial services: Insights from Indonesia," Progress in Development Studies, , vol. 19(1), pages 21-35, January.
    4. Dang, Le Phuong Xuan & Hoang, Viet-Ngu & Nghiem, Son Hong & Wilson, Clevo, 2023. "Social networks with organisational resource, generalised trust and informal loans: Evidence from rural Vietnam," Economic Analysis and Policy, Elsevier, vol. 77(C), pages 388-402.
    5. Thilo Klein, 2015. "Does Anti-Diversification Pay? A One-Sided Matching Model of Microcredit," Cambridge Working Papers in Economics 1521, Faculty of Economics, University of Cambridge.
    6. Lisa D. Cook & Linguère Mously Mbaye & Janet Gerson & Anthony Simpasa, 2021. "Working Paper 358 - The Colonial Origins of Banking Crisis in Africa," Working Paper Series 2484, African Development Bank.
    7. Rahul Nilakantan & Deepak Iyengar & Samar K. Datta & Shashank Rao, 2021. "On Ethical Violations in Microfinance Backed Small Businesses: Family and Household Welfare," Journal of Business Ethics, Springer, vol. 172(4), pages 785-802, September.
    8. Peter Simmons & Nongnuch Tantisantiwong, 2018. "Evaluation of Individual and Group Lending under Asymmetric information," Discussion Papers 18/01, Department of Economics, University of York.
    9. Dong, Jiayun & Liang, Wenyuan & Fu, Yimin & Liu, Weiping & Managi, Shunsuke, 2021. "Impact of devolved forest tenure reform on formal credit access for households: Evidence from Fujian, China," Economic Analysis and Policy, Elsevier, vol. 71(C), pages 486-498.
    10. George Okello Candiya Bongomin & Joseph Mpeera Ntayi & John C. Munene & Charles Malinga Akol, 2017. "Financial intermediation and financial inclusion of poor households: Mediating role of social networks in rural Uganda," Cogent Economics & Finance, Taylor & Francis Journals, vol. 5(1), pages 1362184-136, January.
    11. H.S. Shylendra, 2012. "Community-Based Enabling Models of Microfinance: Praxis and Lessons from India," Millennial Asia, , vol. 3(2), pages 139-168, July.
    12. Mishra, Aswini Kumar & Bhardwaj, Vedant, 2022. "Financial access and household’s borrowing: Policy perspectives of an emerging economy," Journal of Policy Modeling, Elsevier, vol. 44(5), pages 981-999.
    13. Md. Imran Hossain & Md. Al-Amin & Md Abu Toha, 2021. "Are Commercial Agent Banking Services Worthwhile For Financial Inclusion?," Business Management and Strategy, Macrothink Institute, vol. 12(2), pages 206-227, December.
    14. Kibrom A. Abay & Goytom A. Kahsay & Guush Berhane, 2018. "Social Networks and Factor Markets: Panel Data Evidence from Ethiopia," Journal of Development Studies, Taylor & Francis Journals, vol. 54(1), pages 174-190, January.
    15. Sunny Li Sun & Junyon Im, 2015. "Cutting Microfinance Interest Rates: An Opportunity Co–Creation Perspective," Entrepreneurship Theory and Practice, , vol. 39(1), pages 101-128, January.
    16. repec:ags:ijag24:346768 is not listed on IDEAS
    17. Peter J. Simmons & Nongnuch Tantisantiwong, 2022. "The Socially Optimal Loan Auditing with Multiple Projects," Discussion Papers 22/07, Department of Economics, University of York.
    18. Arvind Ashta & Chandralekha Ghosh & Samapti Guha & Frank Lentz, 2021. "Knowledge in Microsocial Milieus: the Case of Microfinance Practices Among Women in India," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 12(1), pages 146-165, March.
    19. Campero Alejandra & Kaiser Karen, 2013. "Access to Credit: Awareness and Use of Formal and Informal Credit Institutions," Working Papers 2013-07, Banco de México.
    20. Hisaki KONO & Kazushi TAKAHASHI, 2010. "Microfinance Revolution: Its Effects, Innovations, And Challenges," The Developing Economies, Institute of Developing Economies, vol. 48(1), pages 15-73, March.
    21. Aguinaga, Paulina & Cassar, Alessandra & Graham, Jennifer & Skora, Lauren & Wydick, Bruce, 2019. "Raising achievement among microentrepreneurs: An experimental test of goals, incentives, and support groups in Medellin, Colombia," Journal of Economic Behavior & Organization, Elsevier, vol. 161(C), pages 79-97.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:deveco:v:52:y:2014:i:4:p:301-321. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://edirc.repec.org/data/idegvjp.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.